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Rx DRUG COSTS: Pentagon and Veterans Should Join Forces

A report by the General Accounting Office recommends that the Departments of Defense and Veterans Affairs merge their drug purchasing programs, suggesting that such a move could result in as much as $300 million in cost savings, the AP/Ft. Worth Star-Telegram reports. "The driving expectation is that as the two agencies buy more of a particular drug, their leverage ... will permit them to exact discounts from drug manufacturers," the report stated. Due to "differing missions and cultures [that] have created rivalries that make it difficult to work together," the two agencies have only purchased 2% of their drugs together. But according to the report, these few instances resulted in "enormous" savings. John Ogden, director of pharmacy services for the VA, cautioned against the report's recommendation, saying it would be "penny-wise and pound-foolish" to merge programs because it would require some patients to switch drugs, "just because we wanted a joint contract." Ogden added that the VA's drug purchasing program already achieves "significant" drug discounts. "I disagree with the assessment that there's hundreds of millions of dollars on the table" that could be saved, he said.

Choice vs. Savings Military officials also voiced their misgivings about joining forces with the VA program, which limits patients' choice of drugs because the DoD program offers a wider range of alternatives. Navy Capt. Charles Hostettler, former director of the Pentagon's pharmacy program, said, "Patient expectations among DoD beneficiaries are different from the expectations of VA beneficiaries," adding, "Patient choice is one of the basic tenets" of the DoD system, and thus "constrains the DoD's ability for merged contracting." The House Veterans Affairs investigations subcommittee requested the report, written by Stephen Backhus, director of the GAO's veterans affairs and military health care. Investigations subcommittee Chair Terry Everett (R-Ala.) said that if the two agencies "can combine their pharmaceutical purchases to save the taxpayers $1.5 billion over five years, then I want to know why it is not being done right now. This is substantial money that could be reinvested to improve health care for our active duty service members and their families, military retirees and veterans." If enacted, a merged program would use a single national contract with one supplier to achieve deep discounts on drug purchases. Additional contracts also could be written to offer patients alternatives according to their medical needs. "'We estimate they could save from about $150 million to $300 million, or about 6% to 12% of their annual combined drug spending' through combined national contracts -- or even through additional national contracts by each agency," Backhus said (Margasak, 7/5).

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